In Cuba, hundreds of state-run beauty salons and barber shops are getting a free-market makeover. Under President Raul Castro, a new economic program is handing over the businesses directly to employees.

But Cuba's hair stylists aren't entirely happy with their cut.

At the Salon Soroa on O'Reilly Street, the setting is everything you would imagine in an Old Havana barber shop.

A live band plays in a rundown cafe on the corner, and inside the barber shop are vintage iron-and-leather chairs with ornate footrests that read "Emil J. Paidar Company, Chicago." Three middle-aged men in white coats work quietly, snipping and trimming, as rickety ceiling fans whirl above.

Rene Navarro has been cutting hair at the Salon Soroa for 15 years, as an employee of the Cuban government. But as of April 1, he has been working for himself.

"This is new to us, and we're still getting used to the change," Navarro says. "We don't know how it's going to work out."

Many in Cuba are watching this experiment closely. It's the first time Cuba's communist government has given up control over some of the small businesses that were nationalized in 1968.

Some barbers say they are thrilled with the change. But Navarro is less enthusiastic. One reason is that he now has to pay nearly $40 a month in taxes and fees. At Cuban prices, that's about 50 haircuts.

"In the past, you worked, reported your hours, earned a salary and took vacations," Navarro says. "Now you don't have any of that. You just work and work."

If it sounds like Cuba is moving toward capitalism, consider that the government still controls about 90 percent of the island's economy. And it will continue to own the barber shops and beauty parlors, even if it allows the workers to run them. That drains some of the incentive to fix them up, so their retro, pre-Cuban Revolution look is probably safe for now.

Havana beautician Yusemi Betancourt is another newly minted but uneasy Cuban entrepreneur. She says she and her co-workers don't have any money saved to fix up their shop or invest in new equipment. The taxes are high, so she has raised prices. But that's driving customers away, she says.

A government rally was held April 16 in Havana to mark the 49th anniversary of the day when Fidel Castro first publicly declared the "socialist" nature of the Cuban Revolution.

Castro made the speech during the Bay of Pigs invasion, rallying thousands of rifle-toting militiamen to defend the island. These days, with his brother Raul Castro in charge and the economy struggling, Cuba is talking about "redefining" socialism.

Ricardo Torres, a graduate student in economics, says that for him -- and for many people in Cuba, socialism represents opportunities -- "the ability of a society to provide opportunities for all of its citizens."

"Socialism is also social justice. So I think we need to change, and it's not easy because there's not like a model to follow. We have to build our own model," Torres says.

Raul Castro didn't speak at the rally, but he recently said that the country may have a million excess workers on government payrolls.

Getting the state out of the small-scale service sector appears to be part of the solution, and places like appliance and watch repair shops are rumored to be next. It's not clear how far the reforms will go, but they are not likely to happen very quickly.